FX.co ★ Russia 10-Year OFZ Bond Yield Tops 16%

The yield on Russia’s 10-year OFZ bond has climbed above 16%, its highest level since February 2025, pushed up by heavy domestic issuance and growing budget uncertainty. With access to international financing blocked by sanctions, the Kremlin is increasingly dependent on costly local borrowing to sustain its wartime economy. Over the next decade, interest payments on public debt are projected to absorb at least 15% of gross domestic product.

Defense spending this year is expected to rise by as much as 5 trillion rubles, or about 40% more than initially planned. As a result, the budget deficit reached 6 trillion rubles in the first five months alone, already about 60% above the full-year 2026 target. Although the government has hit its statutory debt ceiling, lawmakers have rushed through legislation authorizing an additional 2–3 trillion rubles in borrowing.

At the same time, the Bank of Russia recently cut its key interest rate to 14.25%, while cautioning that structural primary budget deficits, projected to persist through 2029, could ultimately force a renewed tightening of monetary policy.